By Stuart Wallace

March 19 (Bloomberg) -- Gold rose for the first time in three days in London as the dollar weakened against currencies such as the euro, buoying demand for the metal as a hedge against further declines in the U.S. currency. Platinum also gained.

Gold has had a correlation of 0.62 against the euro-dollar exchange rate in the past year, compared with 0.46 a year earlier. A figure of 1 would indicate the two move in lockstep. The U.S. Federal Reserve reduced its benchmark rate by 0.75 percentage point to 2.25 percent yesterday.

``The prospect of lower U.S. interest rates in the mid-to- longer-term outlook paints a negative picture for the dollar and a bullish one for gold,'' James Moore, an analyst with London- based TheBullionDesk.com, said in a report today.

Gold for immediate delivery climbed $10.98, or 1.1 percent, to $993.22 an ounce as of 10:05 a.m. in London. The metal reached a record $1,032.70 on March 17. Gold will probably rise as high as $1,250 this year, Moore said.

Assets in StreetTracks Gold Trust, the biggest fund backed by gold, stood at an all-time high of 663.83 metric tons yesterday. Investment in the gold-backed shares created by ETF Securities Ltd. rose to a record 935,633 ounces yesterday.

``With the state of the economy and the nervousness in the markets, gold will continue to be a strong metal this year,'' David Reading, chief executive officer of European Goldfields Ltd., said a television interview in London today.

Silver for immediate delivery rose 23 cents, or 1.2 percent, to $19.95 an ounce. Platinum added $14, or 0.7 percent, to $1,966.50 an ounce and palladium dropped $1.25, or 0.3 percent, to $475.25 an ounce.

Further Rate Cuts

``As with gold, given the negative economic outlook in the U.S., the prospect of further rate cuts in the U.S. and investors' increasing appetite for risk-aversion assets, we expect silver to recover quickly and challenge towards the $21.85 to 22 area,'' Moore said.

The UBS Bloomberg Constant Maturity Commodity Index of 26 raw materials is up 16 percent this year. Gold has gained 19 percent in the period, platinum 29 percent and silver 35 percent.

To graph technical gauges for gold: Moving Averages Relative Strength Index Fibonacci Back Test Technical Gauges

To contact the reporter on this story: Stuart Wallace at swallace6@bloomberg.net